The IRS Ruling Will Only Highlight The Advantages Of Bitcoin – Digital Mining Investments
The IRS Ruling Will Only Highlight The Advantages Of BitcoinAccording to a new IRS ruling, bitcoins are now to be taxed as property, not currency. For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. в- IRS Notice 2014-21Let’s face it, the IRS had to eventually make some ruling on Bitcoinlike Ben Franklin said, nothing is certain but death and taxes. But was this ruling a bad thing? Basically, the IRS only gave a definition to virtual currencies like Bitcoin for tax purposes. It didn’t judge Bitcoin on its merit or future, it simply offered guidance for tax considerations. And it never said bitcoin couldn’t be used as a substitute currency, but rather officially recognized it as virtual currency. вVirtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. в – IRS Notice 2014-21Ironically, it is this statement, coupled with the details of the ruling, that could illustrate to the world how fantastic Bitcoin is as a currency. Why you ask? Well, virtual currencies like Bitcoin have in their very makeup something that no other realв currencies havetechnology. The IRS ruling goes into some detail in the FAQs portion of the notice on how Bitcoin is to be treated in various taxable situations. Because Bitcoin is now considered property, not a currency, any receipt of Bitcoin for goods and services will require one to include the fair market value of the virtual currency, as of the date it was received, in the calculation of his or her gross income. Similarly, if an employee is paid in Bitcoin, he or she must also determine the fair market value and include it in the calculation of gross income. If the bitcoin that was received in the above examples was later exchanged for a good or service, loss or gain on the basis of fair market value when it was exchanged would have to be calculated. At first glance, this tax nightmare could be considered a huge deterrent for anyone wanting to use their bitcoins to buy something. But remember, Bitcoin has an ace up its sleeve…Technology to the RescueThe tax problems outlined above are actually an indication of problems inherent in our fragmented and outdated financial world, not Bitcoin. We have phones in our pockets that take the place of hundreds of devicesflashlights, music players, magnifying glasses, calculators, UPC scanners, video players, the list goes on and on. So shouldn’t we have a financial instrument that shifts smoothly between commodity, financial asset, and currency? Bitcoin does this, and this is precisely why it is rocking the boat so much right nowand why it has survived so much scrutiny. This new IRS ruling has undoubtedly been the bugle sound for an army of coders, financial experts, and entrepreneurs who are now hard at work creating imaginative solutions that smoothly integrate Bitcoin and other virtual currencies into this new tax landscape. And they will be able to do this quickly and effectively because of the digital nature of virtual currency. Imagine being able to move money from an investment to a business or personal account, then exchanging a portion of it into a foreign currency for an upcoming trip, while your wallet not only keeps track of your transactions, but calculates your taxes on the fly, moving money into a special accounts set aside for both business and personal taxes. Imagine at the end of the year that your tax information is automatically entered into a digital tax form and you need only approve the money to be sent to the IRS. Virtual currencies can make all of this possible in the very near future. The IRS ruling is an issue of accounting and this is precisely where virtual currencies shine. In the end it can only highlight the advantages of Bitcoin. So yes, Ben Franklin was right. You can’t escape death and taxes. But when it comes to Bitcoin, tackling the problem of doing those taxes should one day be a breeze.
